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Forex Trading - Top 3 Reasons Why it is Very Popular With Many People
Forex trading also known as currency trading has become one of the huge financial investment markets along with the stock market. Famous as FX trading, it is completely electronic and makes an average per day capital turnover of around $1.5 trillion. This trading basically involves purchasing a particular currency and concomitantly selling another currency.
For instance, if an investor strongly believes that the US Dollar would weaken against the Euro Currency he would want to sell USD/EUR.
Here are the reasons why Forex trading has become so popular.
1. The ease with which one can trade and the accuracy in the trade is what makes it the hot favorite of many people. One can trade round-the clock, unlike the stock market which functions only between stipulated timings.
2. Another reason why it is a hit with many people is the trading costs that a person incurs which is almost nothing. Most of the Forex trading companies do not take any commissions. The pip spread compensates the introducing broker and the trading firm.
3. The third major reason is that there is minimum risk involved in capital loss. A few Forex trading platforms stall trading the moment equity amount in the Forex account goes below the requisite margin level. They can immediately liquidate their positions even before the account goes into negative. There is nothing like a margin call here in this trading for the trader to worry about.
This trading also offers great leverage up to hundred times the value that exists in the trading account that might lead to significant losses within a short period. At the same time, the amount of profits one can make is also huge. There are both pros and cons for this kind of trading or for that matter any kind of trading that involves a lot of risk.
Forex trading and currency futures are investments that are fast paced and so one has to enter the market very carefully if they want to make the most from this market. Not everyone has this kind of a risk appetite and hence it may not be well suited for a certain sect of investors.
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